It was ignited by Isabelle Schnabel of the Executive Council European Central Bank When I showed a graph in February it showed a regression euro Before US dollarTwo months later, Bank of Canada Governor Teff McClem lamented the Canadian dollar’s decline, and Swiss Central Bank President Thomas Jordan hinted that he wanted the franc to strengthen.
The US dollar has risen 7% so far this year, as the Federal Reserve hones in on inflation, and other central bankers, desperately grappling with inflationary spillovers into their own countries, are sending one after another one by one that they welcome for the first time the strengthening of currencies. It helps reduce the cost of imports by strengthening the purchasing power of currencies abroad.
It was a rare intervention pattern as their comments alone moved the market. Two Conservatives escalated the situation on June 16 when Switzerland surprised traders with its first rate hike since 2007, hitting a seven-year high, and then the Bank of England announcing a rate hike hours later, hinting at even bigger hikes ahead.
The strong dollar is the “world’s problem” in the oil market
Currency rates have emerged as a larger part of the inflation equation. Michael Cahill, an economist at Goldman Sachs, said he could not remember a time when central banks of developed countries targeted strengthening their currencies.
The world of foreign exchange calls what is happening a “reverse currency war” because countries have fought against it for more than a decade. A weak currency means that local companies can sell goods abroad at more competitive prices, which helps the economy grow. Boosting purchasing power has suddenly become very important, with the cost of everything from fuel to food to appliances rising.